Conflict mineral rules to test retailers

Thursday, August 23, 2012

The U.S. Securities and Exchange Commission voted 3-2 on Wednesday to approve implementing regulations which require publically traded companies to determine whether their products contain “conflict” minerals from the Democratic Republic of the Congo.
The regulations cover products ranging from jewelry to electronics that are made using gold, tin, tungsten and tantalum from the eastern region of the DRC or surrounding areas.
The National Retail Federation said the SEC responded to some retail industry concerns about new regulations, but that it was too soon to determine the full impact of the regulations on retailers. NRF has argued that it is difficult for retailers to know the source of the metals in products they sell.
“These regulations limit the impact on retailers compared with what was originally proposed but there are some gray areas and we are still assessing what will actually be required,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said, in a statement. “It’s very important that a distinction be made between a retailer who is acting as a manufacturer and has control over what is in a product and the vast majority who do not. "While retailers abhor the violence in the Congo, compliance with these regulations could still be extremely difficult and there is considerable debate on whether filing reports with the SEC will make any difference,” he added.
The regulations will apply not only to manufactures but also to retailers considered to be “contracting to manufacture” private-label merchandise. A retailer simply placing its brand on a generic product would not be covered, but those that have “some actual influence over the manufacturing of that product” would be covered, NRF explained. Retailers selling only third-party merchandise under the product’s own brand rather than the store’s brand are not affected.
NRF and other industry groups sought a three-year delay before the regulations take effect, and also requested the SEC set a “de minimis” level below which products would not be covered. The SEC agreed to delay implementation until May 2014, but did not adopt a de minimis level.
“We welcome the fact that companies will not be able to exempt themselves from reporting in countries where governments do not want revenues disclosed: exemptions represented a 'tyrants' charter,’” said human rights group Global Witness. “The SEC's announcement on de minimis requirements looks promising but requires further scrutiny.”